Fears of a worsening credit crunch triggered a selloff in the stock market Friday that took a heavier toll on mortgage stocks than on the market as a whole. The Dow Jones industrial average fell 281 points, or 2.1%, on the day, but 16 of the 18 mortgage stocks tracked by MortgageWire declined by higher percentages. NetBank, an online bank, and Radian Group, a mortgage insurer, led the downturn among these mortgage stocks, as NetBank's share price fell $0.05, or 18.5%, and Radian's fell $3.75, or 14.2%. Other mortgage stocks that fell more than 5% on the day were Franklin Bank, down 10.7%; LandAmerica Financial, down 9.6%; Doral Financial, down 9.1%; Triad Guaranty, down 8.8%; PMI Mortgage, down 7.7%; Delta Financial, down 7.0%; Countrywide Financial Corp., down 6.6%; IndyMac Bancorp, down 6.6%; Washington Mutual Inc., down 6.6%; and Kaufman & Broad, down 5.4%. News reports attributed the stock plunge to remarks by Bear Stearns officials saying that the mortgage-related credit crunch has led to the worst conditions in the fixed-income markets in more than two decades (see item below).

Bear: Fixed-Income Markets Worst in 20+ Years 

Bears Stearns officials indicated in an Aug. 3 teleconference that the market's recent mortgage-related credit crunch has led to the worst conditions in the fixed-income markets in more than two decades, but said the company is prepared to weather the storm. Comparing the recent credit crunch to other major market disruptions over the past four decades, Bear's chairman and chief executive officer, James E. Cayne, said he believed the company will survive the current crisis as it has past ones. The company's chief risk officer, Michael Alix, said the company has been adjusting its mortgage business accordingly as demand for product in the market has slowed, and it has hedged its positions in troubled asset classes. Bear Stearns can be found at http://www.bearstearns.com.

American Home Goes Bust

American Home Mortgage Investment Corp., Melville, N.Y., will close its doors on Friday and file for bankruptcy protection, MortgageWire has learned. Company chief executive Michael Strauss sent an e-mail message to employees Thursday afternoon saying "the market conditions in both the secondary mortgage market as well as the national real estate market have deteriorated to the point that our business is no longer viable. What this means for most of our employees is that Friday, August 2, 2007 will be your last day of employment." AHM is the nation's 10th-largest residential funder, according to the Quarterly Data Report. It was hurt by margin calls amid a horrific liquidity crisis in the nonprime sector. Sources said Fannie Mae and Freddie Mac are now exploring their options in regard to AHM, which is a conventional and alternative-A funder/servicer. (The government-sponsored enterprises, as a policy, do not comment on financial arrangements they have with their seller/servicers.)

Nomura Closes Conduit, Lays Off Analysts 

Investment banker Nomura Securities has closed its nonconforming mortgage conduit and laid off staff in its fixed-income research department, industry sources have told MortgageWire. Meanwhile, one executive close to Wall Street said three major investment banking houses he has done business with are "prepping" their mortgage departments for layoffs. At deadline time, a Nomura spokesman had not returned telephone calls. Nomura exited the mortgage trading business last fall, when it shifted its mortgage origination/purchase business into a dedicated company with an asset management unit.

NovaStar Suspends Wholesale Ops 

NovaStar Mortgage, a top-15-ranked subprime lender, sent a notice to its brokers on Friday, telling them that it will suspend wholesale production until Aug. 7, industry sources have told MortgageWire. A copy of the e-mail message was sent to MW but could not be confirmed. NovaStar's spokesman could not be reached for comment by deadline time. Based in Kansas City, Mo., NovaStar is the nation's 14th-largest subprime lender, according to the Quarterly Data Report. The e-mail message says that come Aug. 7, the suspension will be "reevaluated."

Nearly 46K Mortgage Jobs Lost Since October

Mortgage companies have cut their payrolls by nearly 46,000 employees since October, including 7,400 full-time positions in June, as the slowdown in mortgage originations, particularly subprime loans, is forcing a retrenchment. The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector fell from 466,200 in May to 458,800 in June. The industry has experienced a 9.1% cutback in the work force since October, when industry employment stood at a 12-month high of 504,700. BLS data are generally good at indicating trends, but slow to react to major changes in the mortgage industry. During the boon years, the BLS data showed that industry employment rose very gradually. But the turmoil in the subprime market could cause significant downdrafts in the months ahead. The BLS can be found online at http://stats.bls.gov.